Atal Realtech RI review (Avoid)

• The company is engaged in construction activities for industrial/commercial structures.
• It posted static top and bottom lines for FY23 and FY24.
• Q1 of FY25 marked minuscule performance indicating its major activities coming in the later part of year.
• There is no harm in skipping this pricey RI bet.

ABOUT COMPANY:
Atal Realtech Ltd. (ARL) is a construction company providing integrated civil works contracting and engineering services and are a registered contractor with the Government of Maharashtra PWD in Class I-A. The Company engages in contracting and sub-contracting for various government and private projects which includes construction of commercial and industrial structures. Majority of the construction activity being undertaken by it includes civil & structural construction under sub-contracting by main contractors, who have been allotted the project by a principle employer. Further, it has undertaken a few projects directly as a Contractor for certain private construction companies and real estate developers. As of the date of this Letter of Offer, it had 28 employees on its payroll.

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 37005000 equity shares of Rs. 2 each at a fixed price of Rs. 7 per share to mobilize Rs. 25.90 cr. The RI opens for subscription on September 02, 2024, and will close on September 10, 2024. The company is offering RI in the ratio of 1 for 2 to its eligible stakeholders as of the record date of August 22, 2024. It is asking for full money on application for the number of shares applied. Post allotment, shares will be listed on BSE and NSE. The company is spending Rs. 0.36 cr. for this IPO process, and from the net proceeds, it will utilize Rs. 21.41 cr. for working capital, and Rs. 4.14 cr. for general corporate purposes (based on simple arithmetic calculations). There is a garble in its total funds utilization data on page no. 44 of the offer document. It shows Rs. 21.41 cr. for working capital and Rs. 4.49 cr. for general corporate purposes with a total of Rs. 1691.65 cr. This is really shocking as to how the concern exchange or regulator has approved such documents with full of errors.

This RI is self-managed by the company itself and Link Intime India Pvt. Ltd. is the registrar to the issue.

Post-RI, company's current paid-up equity capital of Rs. 14.80 cr. will stand enhanced to Rs. 22.20 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 77.71 cr. There is a garble on page no. 35 in regards to equity shares outstanding prior to the issue. It shows 14802000 shares which is totally wrong.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last xxx fiscals, the company has posted a total income/net profit of Rs. 40.69 cr. / Rs. 2.08 cr. (FY23), Rs. 40.96 cr. / Rs. 2.15 cr. (FY24). For Q1 of FY25 ended on June 30, 2024, it earned a net profit of Rs. 0.20 cr. on a total income of Rs. 3.64 cr. While it posted static top and bottom lines for FY23 and FY24, its Q1-FY25 performance is just showing minuscule operations.

DIVIDEND POLICY:
While the offer document is silent on its dividend policy, the company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy post listings of RI shares based on its financial performance and future prospects.

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 543911 (FV Rs. 2).
The scrip last closed on cum-right basis at Rs. 7.66 on August 21, 2024 and opened on an ex-right basis at Rs. 7.60 on August 22, 2024. Since then, it has marked a high/low of Rs. 7.74 / Rs. 7.17. The scrip last closed at Rs. 7.63 as of August 30, 2024. For the last 52 weeks' it has posted a high/low of Rs. 28.61 / Rs. 6.53. The counter is currently trading under ESM: Stage 1.

The promoters' holding has been constant at 49.25% for the last three quarters ended with June 30, 2024. The counter is well managed above the RI price to tempt investors.

Conclusion / Investment Strategy

The company is operating in a highly competitive and fragmented segment of construction activities. It posted static performance for FY23 and FY24 and marked minuscule operations for Q1 of FY25. The RI is relatively appears aggressively priced and is not in line with its performance. Considering its net earnings, hike in post-RI equity capital may witness servicing issue. There is no harm in skipping this pricey RI.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on August 30, 2024

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

About Dilip Davda

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: dilip_davda@rediffmail.com ).

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Atal Realtech Limited Review by Dilip Davda

The Atal Realtech Rights Issue 2024 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered Rights Issue Analysts tells you if Atal Realtech Rights Issue 2024 worth investing. The Atal Realtech Rights Issue 2024 Note sets the Rights Issue expectations in systematic way which tells you if Atal Realtech Rights Issue 2024 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Atal Realtech Rights Issue 2024 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.

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Atal Realtech RI review (Avoid)

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